South America's biggest city is halfway towards a better, more equitable future. Can a new mayor finish the job?

MARLENE DOS SANTOS, a lively, attractive mother of six, clings to the very fringes of São Paulo. Her home is a shack on a patch of dirt that looks like part of the reservoir a few metres away. It is reached via a footbridge over a gully which carries sewage down to the city's drinking water. Mrs dos Santos spends her nights fending off rats, some of which carry leptospirosis, a nasty bacterial fever. But her main worry is that since losing her job as a cleaner six months ago she has yet to find another. Her plight epitomises what is wrong with São Paulo, the southern hemisphere's biggest city and Brazil's economic capital.

A few miles away, in the central business district, skyscrapers gleam, helicopters ferry tycoons above congestion and kidnapping, and celebrity chefs are at their ovens. São Paulo has been called a “city of rings”: a plush “expanded” centre is surrounded by progressively poorer circles. “Inequality is reflected in the physical reality of the city,” says Jorge Wilheim, who until last month was the city's planning secretary. Yet the pressing needs of people like Mrs dos Santos do not drive São Paulo's politics. In October, an election for mayor pitted an incumbent who made notable efforts to improve life in the periphery against a challenger more popular with the middle class.

The mayor, Marta Suplicy, did well in outlying districts such as Grajaú, where Mrs dos Santos lives. But she lost to José Serra, a clever technocrat and former federal health minister. He was helped by middle-class resentment of municipal tax rises and suspicions of Mrs Suplicy's party (the left-wing Workers' Party, or PT, of Brazil's president, Luiz Inácio Lula da Silva) and personal life (she divorced a popular senator and married an Argentine political fixer). Mr Serra, who took office on January 1st, leads the Party of Brazilian Social Democracy (PSDB), the PT's main opposition. Having lost to Lula in a presidential election in 2002, his performance as mayor may have national ramifications.

Beyond promising better administration and fiscal discipline, Mr Serra has said little about where he will lead São Paulo. He takes over a city undergoing multiple transitions. Its economy is increasingly linked to the world and weighted toward services, though the wider metropolitan area remains an industrial powerhouse. New regulatory powers give government more control over land use—a chance to seize the initiative from speculators. São Paulo itself, with a population of 10.7m, is merely the largest of 39 municipalities that comprise a metropolis of 18m. There is a new awareness that all must work together, but the federal and state governments disagree over who should lead. There is an opportunity at last to devise a fairer city. But is there the will?

São Paulo was built on coffee but shaped by immigration and the car. Slaves picked the coffee. European migrants provided the labour for the city's first industries—textiles and food—at the end of the 19th century. Metal-bashing and car plants followed, many in satellite towns. From the 1950s millions of migrants flooded into São Paulo from Brazil's poor north-east.

Early on, the city's leaders opted for a compact, well-appointed nucleus—and let newcomers fend for themselves in the vast periphery. In the 1920s they decided to base public transport on buses, not trains or trolleys, which meant manpower could be shipped to work from almost anywhere. Zoning in the 1970s confined tall buildings to 10% of the city's territory. Poorer paulistanos ended up building their own shelter, often on loteamentos where title is fuzzy. To settle close to reservoirs, as the residents of Grajaú did in the 1970s, was illegal. That made the land cheap but justified the city's sluggishness in providing infrastructure and services. More than a third of the city's homes are “irregular.”

São Paulo is no longer a magnet. Recession in the 1980s and an economic opening in the 1990s struck it harder than other parts of Brazil. Exposed to international competition, industry retrenched and automated, throwing formerly well-paid workers on to the streets. Drugs entered the loteamentos and criminals roamed beyond them, panicking paulistanos into armouring their cars and walling in their houses. The growth rate of the city's population slumped, from 5.6% a year during the 1950s to 0.8% since 1991. Some areas of the periphery and surrounding towns are still growing at breakneck rates, but that comes mostly from poor urban families seeking cheaper housing. To make matters worse, two successive mayors before Mrs Suplicy were accused of large-scale corruption. “The 1990s was the hell of São Paulo history,” says Gilberto Dimenstein, a journalist who writes about the city. “The worst part is over.”

That is partly because Brazil's economy is recovering. Unemployment in metropolitan São Paulo (defined broadly to include people doing odd jobs) fell from 21% in April 2004 to 17% in November. Even so, says Miguel Matteo of SEADE, a government research institute, average wages in 2004 continued an 18-year slide, partly because new service jobs pay less than extinguished manufacturing ones. Yet the city's murder rate peaked in 1999, and has since dropped by about a quarter.

Parts of the periphery have become less wretched. Most of Parque Cocaia, Mrs dos Santos's neighbourhood in Grajaú, is paved. The city provided water, electricity and schools after a “struggle” by its residents, says João Neres de Oliveira, the president of the residents' association. Its bustling high street has chain stores. Grajaú is São Paulo's third most-violent district, with a murder rate of 86 per 100,000 people in 2003. But that is 20% lower than two years before. Mrs Suplicy made it easier to get from Grajaú to the centre. Commuters can now switch buses without paying an extra fare. New express lanes for buses have cut commuting time nearly in half, to little more than an hour. Mr de Oliveira claims that the unemployment rate in Parque Cocaia is 50%. But many of the unemployed now collect a “minimum income”, funded by city, state and federal governments. This reaches 80% of the city's poor, claims Marcio Pochmann, who was Mrs Suplicy's labour secretary.

“Social inclusion is a fundamental commitment,” proclaimed Mr Serra in his inaugural address, meaning he is not going to turn his back on the periphery. But there will be changes, especially given the city's straitened finances. He is likely to stop building Mrs Suplicy's expensive schools-cum-leisure centres aimed at giving the young something to do besides get into trouble. He wants to extend the single ticket from municipal buses to the state-run trains and the metro system. But he frets about its cost. Mr Serra will give health services a higher priority than Mrs Suplicy did. But his first concern is to get more bang from each municipal buck. One of his first acts as mayor was to announce the renegotiation of city contracts.

Redrawing the map

If Mr Serra merely pinches pennies, he will miss a chance to influence the redrawing of São Paulo's map, which is in both political and physical flux. Brazil's federal system does not provide for metropolitan government. For example, while the municipality manages the city's bus network, the state runs its trains, the metro and inter-city buses. The system links the city to satellite municipalities, but moving between these is a nightmare. This cuts people off from potential jobs. Likewise in health: federal funding goes straight to municipalities in accordance with their populations, but services are not co-ordinated. In Diadema, which borders São Paulo, half the patients in the hospital are from neighbouring municipalities, says Mário Reali, a state assemblyman. Since 30% of Diadema's budget is spent on health, that is no small matter. And so on.

Metropolitan government might make sense, but vested interests and the constitution make it unlikely. Instead, Lula's government wants “consortia” of municipalities, which would receive funds for joint projects in such areas as transport and waste management. But the São Paulo state government, run since 1994 by the PSDB, argues that the constitution makes states responsible for regional co-ordination. The PT wants to bypass the states because it governs so few of them, says Andrea Calabi, the economic secretary of São Paulo state. Its initiative “poses a threat to how you organise government in Brazil.” But the city and the state should get along better now that the mayor and the governor belong to the same party.

The state government envisages a trio of institutions to manage the São Paulo metropolis: an advisory “development council”, composed of state and municipal representatives, which could suggest, for example, where to put schools and hospitals; a common fund to which all would contribute; and an agency to execute the council's decisions. Neighbouring municipalities, especially those run by the PT, are wary. They have “participated very little” in the state's metropolitan musings, complains Mr Reali of Diadema. And it would be hard to balance the interests of rich, powerful São Paulo with those of its smaller and poorer satellites. But such squabbles hide common aims. Marcos Campagnone, chief of the state's planning agency, wants to “reverse the spread of the periphery” partly by completing an orbital road and rail line to siphon away through-traffic and, he hopes, create a barrier to further urban sprawl. Raquel Rolnik, an official at the federal cities ministry, calls for “growing towards the centre”. Both envisage a denser, more uniform metropolis.

Mrs Suplicy's team drew up some schemes to this effect, under a 2001 law which mandates municipalities to draw up “master plans” reconciling private interests with the “social function” of urban property. São Paulo's plan, completed last year, would create new areas of low-income housing and a new fund for public works financed by selling building permits and permitting the city to expropriate abandoned land. One scheme planned by Mrs Suplicy, Bairro Novo (new neighbourhood), would house 70,000 people, including 600 low-income families, in an area of abandoned factories close to the centre and serviced by train. It would be São Paulo's first planned community, boasts Mr Wilheim, and would break (a little) the pattern of separate ghettos for rich and poor. Another project would deal a blow to the hub-and-spoke traffic model: a road between Guarulhos, the site of São Paulo's international airport, and the industrial region south of the city.

How much of this Mr Serra will continue is unclear. He has endorsed the new road but says the master plan needs revision. Paulistanos—not least those mouldering in the outer ring—will hope that the city's still incipient revival will strengthen under their new mayor.